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Fair Isaac Is An Oxymoron!

By William J. Archambault, Jr.

Services for Real Estate Pros with The Real Estate Investment Institute 1retiredsage

September 30, 2011 12:37 PM

Fair Isaac, the propagators of FICO Scores doesn’t measure your ability or willingness to pay your debits!

? Fair Isaac doesn’t measure your credit although your credit is a portion of there scoreing preversion!

Fair Isaac measures you against their own proprietary model and they do it with out regard to your ability and less than 1/3 of it is based on your history of making your payments!

The extremes, both ends of income have major problems with Fair Isaac as does anyone with non-traditional income.

Fair Isaac doesn’t know your income yet lowers your score drastically for to much credit despite a long history of paying as agreed, paying on time.

Fair Isaac doesn’t know your income yet lowers your score for to little credit!

Fair Isaac has replaced "Jim Crow Laws" as institutionalized discrimination!

Just like the "Jim Crow Laws" if you don’t look like the majority of your neighbors your discriminated against! There is no real difference, except ignorance attaches a stigma of disgrace to a low FICO Score that can’t be seen, so instead of fighting for equality we cope with lower scores, grumbling in siclence!

Jim Crow Fair Isaac hurts those among us with less ability, despite their personal responsibility to live with in their means!

All that said, Fair Isaac has done some wonderful things. Of course in the time of "Jim Crow" the same could be said of knowing a friendly banker!

Fair Isaac has allowed automated underwriting.

Fair Isaac has taken racial discrimination out of lending, it judges you on who you are as opposed to who you know, but you must act like Joe Average!

I’m all for keeping Fair Isaac, keeping it in it’s place that is!

I’d let lenders use Fair Isaacto approve loans. (Remember it’s the lender not FICO that approves your loan.) But, FICO scores should not be used to turn down a loan or any thing else! I suggest that before a loan can be turned down that it must be under written by a real live loan officer, who has to state why other than a low FICO Score a loan was turned down!

Make no mistake the only real difference between Fair Isaac and "Jim Crow Laws" is that no one ever voted for Fair Isaac and it applies to allot more victims!

Equal if you act like Fair Isaac's normal.

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Lisa Wetzel

RE/MAX Realty Affiliates - Carson City, NV

CDPE, SFR carsonvalleyland.com

Hey william ... You are right! What a blog! I couldn't have phrased it better myself!

Sep 30, 2011 12:52 PM

William J. Archambault, Jr.

The Real Estate Investment Institute - Houston, TX

Thanks Lisa!

I'm glad you liked it.

Bill

Sep 30, 2011 01:26 PM

Bonnie Vaughan

Scranton, PA

CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

It has always boggled my mind how a private company can have a strangle hold on the financial fate of Americans, and never be forced to reveal their algorithm. One does not really know whether they can or do practice discrimination. I still feel single women or women who purchase on credit without their spouses do not get as good a deal as a man would.

Factors such as your address could have a negative impact on your score. Streets known to be in the "bad part of town" can trigger a factor which might give you a lower score.

The creditors pay to get access to credit files. A lower score often results in a higher interest rate charged by the lender. If everyone had good ratings the banks would have to charge less interest. Who is the client of Fair Isaacs? The banks and lenders. To keep the clients happy Fair Isaacs has to be sure a certain percentage of inquiries result in less than perfection.

Fair Isaacs is a monopoly which should not be allowed to exist without full disclosure of how their scores are computed.

Sep 30, 2011 01:45 PM

Broker Nick

South Florida Real Estate & Development, Inc. - Coconut Creek, FL

Broker Nick Relocation Broker Service

One of your best posts, my friend. There has never been a fair Isaacs - excuse the pun. Too vague and too broad - how is that?

Sep 30, 2011 02:40 PM

Congratulations - This post is now featured in Silent Majority Group of Active Rain!

Sep 30, 2011 02:41 PM

Bonnie,

"Red Lining" occurs, but I've never seen it on a credit report. Although slum Lords are less likely to report good credit to the credit bureaus and more likely to report bad. Today you're most likely to see mimum loan amounts having the "red line" effect.

One knows! it's not the traditional disgrace, but if you don't match their model acrual credit has no relevance.

Risk based rates make sense, but raising the rate increases the risk another oxymoron.

FICO does great things for Joe Avarge, but to allow an arbitrary score to reject an applicant is abused! The best credit risk I ever saw had a 480 FICO.

Sep 30, 2011 05:01 PM

Nick,

Thank you!

I'm honored.

Sep 30, 2011 05:02 PM

Todd Clark - Retired

eXp Realty LLC - Tigard, OR

Principle Broker Oregon

I used to work for a credit card company that specialized in people with low credit scores and it amazed how often I would see people having to get their card just because they had no credit history or despite making millions, having too much credit. (There was one movie star that had to get our credit card because of their debt despite never having a late payment)

Oct 01, 2011 05:42 AM

Todd,

It's true most people with poor scores have bad credit, but not all!

It's true most people with credit problems have low scores, but not all!

It's true that many people need alternative cards to establish already good credit, just because of FICO Scoreing!

It's true that it's only ignorance and/or shame that people use these cards, they don't know that their local bank can provied them a secured "credit card" at great rates not just "debit card" that reports just like it's unsecured sibling!

Pubertsent kids know more about sex than adults know about credit!

Oct 01, 2011 09:32 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Bill, the FICO score plays a bigger role today than I have seen it play before. Not only do Lenders require a minimum score based on the program being applied for, but Fannie Mae, is wacking Borrowers with all sort of points for ever 20 point increment that they fall below 740.

Oct 01, 2011 12:28 PM

George,

I'm very aware of it!

That just makes the pain it causes all the more expensive!

I have no problem with risk based rates, but FICO Scores have little to do with risk only how one man compares with Fair Isaac's norm.

Oct 01, 2011 01:21 PM

Fair Isaac Is An Oxymoron!

Comments(11)

One of your best posts, my friend. There has never been a fair Isaacs - excuse the pun. Too vague and too broad - how is that?

William J. Archambault, Jr.

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